Temporary Zero-rating of Certain Medical Equipment
The temporary zero-rating on medical equipment was legally validated by Cabinet Decision No. 9/12 of 2020. Furthermore, the Ministerial Decision No. 380 of 2020 (“Ministerial Decision”) issued by the Minister of Health and Prevention on 6 December 2020 (with effect from 1 September 2020) specifies the medical equipment that are zero-rated in accordance with the Cabinet Decision.
The “medical equipment” to which the temporary zero-rating rules apply are personal protective equipment which are used for the protection from Covid-19, and which contain the features and meet the specifications determined and specified by the Ministerial Decision.
Eligible such medical equipment is limited to the following items:
- Medical face masks (that are not included in the Cabinet Decision No.56 of 2017 on Medications and Medical Equipment Subject to Tax at Zero Rate).
- Half-filtered face masks.
- Non-medical “community” face masks (made from textile).
- Single-use gloves.
- Chemical disinfectants and antiseptics intended for use on the human body (but excluding detergents, cosmetics, and personal care products).
Circumstances Under Medical Equipment are Zero-rated.
As per the Cabinet Decision No. 9/12 of 2020, Under certain conditions the medical equipment listed in the ministerial decision become eligible for 0% VAT in UAE. Such circumstances are mentioned below:
- In respect of supplies of medical equipment, a supply can be zero-rated where the date of supply takes place, and the medical equipment is delivered to the recipient or placed at the recipient’s disposal in the period from 1 September 2020 to 31 December 2021.
- In respect of imports of medical equipment, an import can be zero-rated when the medical equipment is imported in the period from 1 September 2020 to 31 December 2021.
When Does Standard Rate Apply on Supply & Import.
A supply or import outside the referred period i.e., from 1 September 2020 to 31 December 2021 is subject to VAT at a rate of 5% and this VAT must be reported in the tax return of the relevant tax period.
In a scenario where the supplier charged VAT at 5% on a supply that were eligible for zero rated under Cabinet Decision. In such situations, whereas:
- If the supplier knows the identity of the recipient, then the supplier shall issue a credit note to them to get a refund on the overcharged VAT on that supply. Accordingly, the supplier may reduce its output tax by the amount of the VAT shown in the tax credit note.
- If the supplier is unable to identify a recipient for the purpose of issuing and delivering the tax credit note, then the supplier should ensure to report, and remit collected VAT amounts to the tax authority.
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